August 17, 2015 — The Centers for Medicare & Medicaid Service (CMS) announced that over 2,100 healthcare facilities have agreed to participate in the Bundled Payments for Care initiative to improve care and reduce costs for Medicare. Participants — which include acute care hospitals, skilled nursing facilities, physician group practices, long-term care hospitals, inpatient rehabilitation facilities and home health agencies — have transitioned from a preparatory period to a risk-bearing implementation period in which they assumed financial risk for episodes of care.

The participants include 360 organizations that have entered into agreements with CMS to participate in the Bundled Payments for Care Improvement initiative and an additional 1,755 providers who have partnered with those organizations. CMS defines an episode of care as the set of services provided to treat a clinical condition or procedure, such as a heart bypass surgery or a hip replacement.

“We are excited that thousands of providers in the Bundled Payments for Care Improvement initiative have joined us in changing the healthcare system to pay for quality over quantity — spending our dollars more wisely and improving care for Medicare beneficiaries,” said Patrick Conway, M.D., CMS acting principal deputy administrator and chief medical officer. “By focusing on outcomes for an episode of care, rather than separate procedures in care delivery, we are incentivizing hospitals, doctors and other providers to work together to provide high-quality, coordinated care for patients.”

Bundling payment for services that patients receive across a single episode of care is one way to encourage doctors, hospitals and other healthcare providers to work together to better coordinate care for patients, both when they are in the hospital and after they are discharged. Through the Bundled Payments for Care Improvement initiative, CMS is testing how bundled payments for clinical episodes can result in better care, smarter spending and healthier people. This announcement means several hundred providers are advancing into a program that rewards them for increasing quality and reducing costs while also penalizing them if costs exceed a set amount.

The initiative includes four models of bundled payments tied to inpatient hospital admission. The models vary by the types of providers involved and the length of the bundle after the hospitalization.

CMS recently announced a new Medicare Part A and B payment model, the Comprehensive Care for Joint Replacement Model. Although the model is distinct from the Bundled Payments for Care Improvement initiative, both initiatives are part of the framework established by the Affordable Care Act to move the healthcare system toward one that rewards providers based on the quality, not quantity, of care they deliver to patients. The Obama administration earlier this year announced the goal of tying 30 percent of Medicare payments to quality and value through alternative payment models by 2016 and 50 percent of payments by 2018.